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Viscount Bridgeman: I am grateful to the Minister for her most helpful reply, which addresses our concerns. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 agreed to.

Clauses 19 to 22 agreed to.

Clause 23 [Owner's powers]:

Lord Goodhart moved Amendment No. 27:



"( ) Owner's powers to charge a registered estate or a registered charge may be exercised by a document expressed to create a charge by way of legal mortgage, whether or not that document is a deed."

The noble Lord said: The amendment picks up a point that is made in paragraph 7.6 of the Law Commission's report. The Law Commission proposed in its consultative document that a deed should not be necessary in order to create a registered charge giving a chargee powers under Section 101 of the Law of Property Act. According to a subsequent report, that proposal was accepted by most respondents. However, the Law Commission changed its mind simply on the ground that this particular provision would not be necessary when electronic conveyancing was introduced, and the commission expected that only a relatively short time would elapse before its introduction.

I am slightly more pessimistic about this matter than the Law Commission. It seems to me that there is a possibility that e-conveyancing could be, not a matter of months, but several years off. Therefore, I cannot see any objection to removing as an interim stage the requirement that a charge should be by deed. The provision does not seem to serve any useful purpose. The Law Commission appears to be happy in principle that that obligation should be removed, so why not allow its removal? The aim of this amendment, and of Amendment No 28 which is grouped with it, is that this should be possible. I beg to move.

Viscount Bridgeman: I wish to speak to Amendment No. 28. This amendment is designed to ensure that if anyone tries to create a charge or sub-charge in a way which the new system prohibits--for example, by using an old printed form which creates a mortgage by demise--the instrument operates as a legal charge under Clause 23(1) and Clause 51, rather than being absolutely void as a purported disposition which the

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proprietor has no power to make or operating as an equitable charge arising from a contract for a mortgage in which case it might be ineffective if there was no document signed as a contract under Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

The insertion of a provision governing the consequences of a disposition in a form forbidden by the legislation, and validating it as a transaction of the type permitted, is the same technique as was adopted in Sections 85(2) and 86(2) of the Law of Property Act 1925 when mortgages by assignment were abolished. The first paragraph of the proposed new subsection preserves, out of caution, provision for what will happen if someone tries to create a mortgage by assignment. This is technically needed, because paragraph 2(6) and (7) of Schedule 11 effectively repeal the equivalent provisions of the Law of Property Act 1925 in relation to registered land. I beg to move.

6 p.m.

Baroness Scotland of Asthal: Perhaps I may begin by dealing with one of the concerns expressed by the noble Lord, Lord Goodhart. When speaking to his amendment, he said that he reasonably anticipated that charges were a long way away from being handled electronically. I must disabuse him of that: charges will be one of the earlier parts of e-conveyancing to be implemented. We realistically expect that this may be available next year. Therefore, I caution the noble Lord to prepare himself.

This amendment has been grouped for discussion with Amendment No. 28. The amendments relate to the manner in which an owner can exercise his power to charge his property. Clause 23 sets out the powers of an estate owner to deal with that estate. It includes an unlimited power to do anything that is possible under the general law, with one exception. At the moment, it is possible to create a legal mortgage by demise or sub-demise over registered land. These methods will be abolished by the Bill, as they are no longer used. Instead, the owner will be able to create a legal mortgage in two ways: by either a charge expressed to be by way of legal mortgage; or a charge to secure the payment of money.

The form of charge is short and simple, and it is made by way of a deed. Amendment No. 27 gives an owner an additional power to create a charge by a document which is expressed to be by way of legal mortgage, but one which is not necessarily a deed. If I may respectfully say so, this idea is not entirely new. It was floated in the joint Law Commission/Land Registry consultative document. The arguments for this option were said to be that the rights of the parties are determined by registration of the document not the method by which the document is executed by the parties. This suggestion has not been taken forward in the Bill. The reason for that is a very practical one.

The Bill is setting the framework for electronic documentation and conveyancing. As I said earlier, the first of those electronic documents is likely to be an

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electronic charge. This is likely to be taken forward in the near future. Again, I tempt the noble Lord as regards the possible date. The precise form of written instrument used to create a charge will therefore cease to be relevant very quickly.

As I said, the current methods are simple to use. No-one will be prejudiced by the failure to introduce this change in the run-up to electronic charges. There is little point in permitting this additional method for a short space of time, when there are so many other longer-term adjustments that will need to be made. Amendment No. 28 also amends Clause 23. It adds two further ways of charging a property. The first restores the mortgage by demise or sub-demise. Again, the Law Commission comes to our assistance because its consultation document specifically asked whether those methods of making a charge were now used, given the easier method of using a form of charge. The clear consensus was that they are not. Therefore, it seems unnecessary--and indeed undesirable--to clutter up the statute book with a provision that has fallen out of use when there is an alternative method that achieves all that the earlier option achieved, and one that is considerably simpler for all concerned.

The second way enables a legal mortgage or sub-mortgage to be used to have the same effect as a charge. We suggest that this is also an undesirable step. We are moving to the electronic world. The first documents that are likely to become electronic are charges. They will be easy to draft, simple and electronic. It is not desirable to allow a less convenient method to be introduced as an alternative way to deal with the mortgaging of registered land. The move for electronic conveyancing must be towards rather than away from standardisation. We believe that that will make the completion of such work much simpler. The use of a charge document is not onerous. However, its use is beneficial to the conveyancing community at large. I therefore invite the noble Lord and the noble Viscount not to press their amendments in this regard.

I should also stress that one of the delights that I have in proposing these issues to the Committee derives from the fact that the Law Commission has done so much of the work for us; and there is consensus. We have tried to be utterly practical with this Bill, so that people will know how to apply the legislation and be able to do so with ease. We shall also have the benefit of the professions advising us as to how to do this more easily. If we felt that there was a lacuna in this respect, I can certainly reassure noble Lords that we should be very happy to address it. However, there does not appear to be a need for that at present.

Lord Goodhart: I hope that the Minister's prediction of the time within which electronic conveyancing of charges will be brought in is accurate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 28 not moved.]

Clause 23 agreed to.

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Clause 24 [Right to exercise owner's powers]:

Baroness Buscombe moved Amendment No. 29:


    Page 11, line 25, at beginning insert "The manner of exercise of"

The noble Baroness said: In moving Amendment No. 29, I should like also, with the leave of the Minister, to include Amendment No. 30 in my remarks. I believe that it makes sense to deal with the two amendments as a group.

Both amendments are intended to restrict the rule-making power by confining it to prescribing how owners' powers are to be exercised and the form of registrable dispositions, and to eliminate any possibility of rules imposing substantive restrictions on the powers that can be exercised--who can exercise them, or what provisions parties to dispositions can validly agree and include: for example, in a lease, as to alienation; or in a charge, as to the circumstances in which repayment can be demanded. Such restrictions would probably never be deliberately imposed by land registration rules. But if it should happen that such rules are made in terms in which their effect in a particular situation is open to argument, any possible interpretation of them as imposing substantive restrictions will, we suggest, be untenable if it is ultra vires the rule-maker to do so. I beg to move.

Lord Bassam of Brighton: Clause 24 identifies the persons who can exercise an owner's powers of dealing with the registered estate. This includes not only the person who is actually registered as the owner of the registered estate, but also any person who is entitled to be entered as proprietor.

Subsection (2) makes the exercise of the rights of those who are entitled to be registered subject to rules. The intention is that rules will prescribe how the powers are to be exercised. This is done under the current land registration system by prescribing that the forms of disposition that they should use are the same as if they had already been registered; and that, before registration is completed, they must show to the registrar's satisfaction that they are entitled to be registered as the proprietor of the land.

Amendment No. 29 helpfully makes it clearer that the rule-making power is limited to the manner in which the rights to deal with the land are exercised, and does not seek to restrict the actual powers of disposition. That is our intention, as set out in the provision. We are grateful to the noble Baroness for suggesting the amendment. In our view, this issue merits further investigation, as well as clarification of the intended use of this rule-making power.

There are a variety of rule-making powers located in the Bill, both in the specific clauses dealing with particular areas and, more generally, in Schedule 10. It may be that on further consideration the powers needed are already contained in other provisions within the Bill. We undertake to report back on this issue at Report stage and give careful consideration to the helpful points which have been raised. On that basis, I ask the noble Baroness to withdraw the amendment while we carry out that urgent investigation.

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I turn to Amendment No. 30. Clause 25 relates to the way in which an owner can exercise his power to deal with a registered estate or charge. A registrable disposition will only have effect if it complies with detailed rules. The amendment tabled by the noble Baroness seeks to limit the rule-making power to the form, but not the content, of the registrable disposition.

This clause is a very important provision when we look forward towards electronic conveyancing, which has been much discussed today. The form of the disposition may in fact become the completion of fields on a computer screen with the necessary details of specific terms which have been agreed. The content of such electronic documents will therefore be all important.

I appreciate that there will be concern about the prescriptive nature of the rules made under this provision, especially as the provision is somewhat wider in scope than the provision which exists under the current law. I can, however, reassure the noble Baroness that there is no intention to curb the owner's powers to deal with the registered estate beyond what is required to make the system work in an effective manner for all concerned. The rules made under this provision will be subject to the scrutiny of the Land Registration Rule Committee, which is well placed to decide how far these details need to be set down and to vary them as circumstances change. That committee would be able to review the details which the registry requires with the details which conveyancers are able to provide. This will be difficult to predict in advance and will need adaptation as methods of dealing with the registry change.

As the Committee will appreciate, this provision will be an essential part of the development of the electronic conveyancing process. I hope that in the light of those comments the noble Baroness will feel able to withdraw the amendment. I hope that she is satisfied with my earlier assurances on Amendment No. 29.


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